Case  CCT 27/19 & CCT86/19
[2020] ZACC 21

Hearing Date:        13 August 2019
Judgement Date: 04 August 2020

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On 4 August 2020 at 10h00, the Constitutional Court handed down judgment in two applications for leave to appeal against orders of the Labour Appeal Court. The central dispute in the main application, CCT 27/19, concerned the applicability of section 197 of the Labour Relations Act 66 of 1995 (LRA) to the transfer of the electronic National Traffic Information System (eNaTIS) from Tasima (Pty) Ltd (Tasima) to the Road Traffic Management Corporation (RTMC). The cross-appeal, CCT 27/19, concerned the effective date of such transfer. The second application, CCT 86/19 related to the interim enforcement of declaratory relief granted regarding the section 197 transfer, pending finalisation of that in this Court.

The RTMC is an organ of state with a statutory mandate to establish and run an effective road traffic management system. The Department of Transport entered into a Turnkey Agreement with Tasima for the development of the eNaTIS and the provision of related services. The eNaTIS is an essential facility used by the government in road traffic management. After the expiry of the Turnkey Agreement, the parties concluded an interim arrangement, followed by an unlawful five-year extension agreement. Subsequent disputes between the RTMC and Tasima regarding the eNaTIS system have already resulted in two judgments by this Court.

In Tasima I, this Court made an order on 9 November 2016 that the eNaTIS system and related services be transferred from Tasima to the RTMC within a period of 30 days. In terms of this Court’s judgment, the transfer was required to take place in accordance with the Migration Plan in the Turnkey Agreement in the event that the parties were unable to agree on an alternative plan.

In relation to the section 197 transfer, the Labour Court and the Labour Appeal Court both held that section 197 of the LRA applied to the transfer of the eNaTIS and granted declaratory relief to the effect that Tasima’s employees were automatically transferred to the RTMC. The Labour Court held that the effective date of the transfer was the date on which the eNaTIS was, as a matter of fact, transferred. The Labour Appeal Court, however, found that the effective date of the transfer was the date on which the High Court had, in the original proceedings, declared the extension agreement invalid.

In relation to interim relief regarding the section 197 transfer, the Labour Court ordered the interim enforcement of the declaratory relief and ordered the RTMC to take transfer of Tasima’s employees within a specified time period. The Labour Appeal Court, however, upheld an appeal against the interim enforcement order, because it found that Tasima had failed to meet the jurisdictional requirements of section 18(3) of the Superior Courts Act 10 of 2013 (Superior Courts Act). Section 18(3) of the Superior Courts Act provides that in exceptional circumstances, the operation of a decision that is the subject of an appeal may be suspended pending the outcome of that appeal. The Labour Appeal Court also held that the enforcement order constituted consequential relief insofar as it required the RTMC to take transfer of the employees, and that the Labour Court did not have jurisdiction to grant such relief under section 18(3) of the Superior Courts Act.

The first judgment, penned by Theron J and concurred in by Cameron J, Froneman J, Madlanga J, Mathopo AJ and Victor AJ held, in the main application under CCT 27/19, that the legal causa (basis) for the transfer determines the parameters for the application of the test in section 197. It further held that the legal causa for the transfer was this Court’s order in Tasima I – not the expired Turnkey Agreement. According to the first judgment, this Court did not order the transfer of an earlier version of the eNaTIS on the terms set out in the Turnkey Agreement. Rather, this Court granted a just and equitable remedy requiring the transfer of the eNaTIS as it stood on 9 November 2016, with the related services performed by Tasima, including the operation, maintenance and management of the eNaTIS. The first judgment found that the operation, maintenance and management of the eNaTIS was Tasima’s sole business and that it was this business that was transferred to the RTMC. The RTMC took over Tasima’s business “as is”, immediately after the transfer, carrying on the business on the same premises, using the same assets, performing an identical function and rendering the same services. The first judgment accordingly held that the transfer of the eNaTIS constituted the transfer of a business as a going concern for the purposes of section 197 and dismissed the appeal.

In the cross appeal, in CCT 27/19, the first judgment held that the effective date of transfer was 5 April 2017 – the date upon which the RTMC took actual control of the eNaTIS and services. The transfer of a business as a going concern must take place within the parameters of the legal causa. This should, and ordinarily would be, the date of this Court’s order in Tasima I, according to which the obligation to transfer arose on 22 December 2016. However, the first judgment held that this general approach may be deviated from in exceptional circumstances. Where there is a clear schism between the date on which the obligation to transfer arises according to the legal causa and the actual date on which transfer takes place and where inequities and absurdities may arise as a result of deeming the transfer to have occurred on the date stipulated in the legal causa, the factual date of handover may be deemed the effective date. The first judgment upheld the crossappeal and substituted the order of the Labour Appeal Court with an order that the effective date of transfer was 5 April 2017.

In relation to the interim enforcement of the declaratory relief under CCT 86/19, the first judgment held that the matter is moot, since it no longer presents any live controversy between the parties. There is no interim period during which this Court could order the operation and execution of the declaratory relief regarding section 197, since this Court’s decision in the section 197 application has finally determined who is responsible for the employees. The first judgment further held that it was not in the interests of justice to grant leave to appeal, notwithstanding mootness, because an order by this Court would have no practical effect. The first judgment accordingly refused leave to appeal.

The second judgment, penned by Jafta J, Khampepe J and Mhlantla J and concurred in by Mogoeng CJ agreed with the first judgment, in so far as it related to the outcome of the application under CCT 86/19. The second judgment however disagreed with the reasoning and outcome proffered in the main application in CCT 27/19, which deals with the interpretation and application of section 197 of the LRA. It held that section 197 of the LRA was not triggered and did not find application on these facts.

The second judgment held that the objective facts illustrate the opposite – that is, there was a handover of the eNaTIS system to the RTMC, which did not activate the legal consequences of section 197 of the LRA. The second judgment surmised that Tasima was awarded a tender by the Department to provide services relating to the eNaTIS system. The Department contracted Tasima for a single specific work project which encompassed the development and maintenance of the eNaTIS system for a period of five years. Upon completion of the project, Tasima would deliver the product to RTMC as set out in the Turnkey Agreement. Numerous factors indicated that the RTMC never intended to transfer a business, including the fact that the Department provided office space for Tasima from which Tasima was required to work, the RTMC owned all the assets that Tasima used during the period when the eNaTIS system was being developed, that Tasima employed its own workforce to help it develop the eNaTIS system to the specifications of the Turnkey Agreement and it is common cause that the affected employees were, at all material times, employed and remunerated by Tasima and conducted business for Tasima.

The second judgment reasoned that, Tasima’s business was not the eNaTIS system or the operation of it – it was its development and maintenance. It was not in the business of supplying services through the eNaTIS system. As mentioned, the eNaTIS system was a product produced by Tasima specifically to enable the Department to provide various services to the public.

The second judgment further held that Tasima I is not a legal causa giving rise to new set of obligations and rights between the parties. Tasima I merely gave effect to the logical consequence of the Turnkey Agreement. The order in Tasima I did not create new rights and obligations between the litigating parties – it simply vindicated the Turnkey Agreement (and its consequences, like the activation of the Migration Plan) and pronounced on the invalidity of the subsequent extensions.

The second judgment held that, RTMC did not acquire the business of designing, developing and maintaining information systems. Accordingly, it would be incorrect to conclude that the RTMC acquired Tasima’s business.

In the result, the second judgment held that it would have granted leave to appeal and upheld the appeal in the main application under CCT 27/19.

 

 

The Full judgment  here